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Amid rising tensions between Malaysia’s biggest trading partners, the United States and China, the Southeast Asian country is increasingly looking to hitch a ride to its more successful neighbor Singapore. There is.
The special economic zone spanning the two countries is designed with a number of initiatives to build stronger ties to help both countries withstand tougher global economic trade conditions.
“We are entering a new era of continued global tensions,” Singapore Prime Minister Lawrence Wong warned at the signing ceremony for the Johor-Singapore Special Economic Zone Agreement this month. “The world is becoming an increasingly dangerous and problematic place. This is not going to go away anytime soon.”
Standing by him, Malaysian Anwar Ibrahim added: “We must strengthen ourselves as a regional power to withstand unpredictable pressures from other regions, groups and regions.” .
Malaysia’s close relationship with Singapore comes as the country seeks to use its chairmanship of the Association of Southeast Asian Nations this year to forge stronger ties with its closest neighbor as global trade networks become increasingly fragmented. This is part of the promotion.
Malaysian central bank governor Abdul Rashid Ghafoor told the Financial Times that “[the trade war]could create opportunities for ASEAN,” but warned that increased protectionism would hurt global growth. admitted.
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The two countries were not always close. It has been 60 years since Malaysia expelled Singapore from the federation and established it as an independent city-state amid racial tensions and political conflict between the two sides.
For most of the past 60 years, the two countries have viewed each other with suspicion and been locked in a deep rivalry, with Singapore, Malaysia’s largest trading partner, emerging as the clear winner. . It has established itself as a global trading and financial center, with a GDP of $94,000 compared to Malaysia’s $14,400.
But with Donald Trump returning to the White House this week, a flurry of tariff promises and a slowing Chinese economy, Malaysia and Singapore are looking to strengthen ties.
Malaysian Economy Minister Rafizi Ramli told the FT: “Generations of leaders in Malaysia and Singapore have had to manage[this conflict]. I can no longer do very common sense things.” A state that borders Singapore. “By operating almost as an economic unit, investors will get the best of both worlds.”
Modeled after China’s neighboring Shenzhen Special Economic Zone, JSSEZ is twice the size of Hong Kong and is at the heart of Malaysia’s ambitions to build on last year’s 5% economic growth.
Malaysia is already a key player in the global demand for artificial intelligence, having spent decades developing Asia’s largest semiconductor hub on its North Island, Penang, and recently welcoming major technology companies to set up data centers on the island. It is positioning the economy to play a role. South.
It has also benefited from the “China plus one” strategy, in which multinational companies supplement their China operations with investments in regional countries to diversify risks and reduce costs.
The government expects the JSSEZ to add $26 billion a year to the economy by 2030, bringing 20,000 skilled jobs and 50 new projects.
For 15 years, it has applied a generous corporate tax rate of just 5% to companies that invest in areas such as AI and quantum computing or make high-end equipment. By comparison, Malaysia’s average interest rate is between 15 and 24 percent, and Singapore’s lowest rate is 17 percent.
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The state of Johor has already become an important driver of Malaysia’s economy in recent years, thanks in part to the pro-business sultan who took over a year ago.
The state has emerged as a global hub for data centers, attracting more than $25 billion in investment from the likes of Nvidia, Microsoft and TikTok owner ByteDance, and creating 35,000 jobs.
While Johor offers an abundance of cheap land, water, energy and labor for project development, Singapore is an entry point for investors.
“Conceptually (the SEZ) is a differentiated proposition, leveraging the capabilities of Singapore’s world-class financial and logistics center with access to competitive land, labor and energy in Johor. “China trade war,” said Thiran Wickremesinghe, an analyst at Maybank.
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However, it is not just major technology companies that JSSEZ is aiming to attract. Johor also hopes to attract everything from Singapore banks to set up administrative offices to aerospace, electronics and pharmaceutical companies to set up manufacturing bases.
The two neighboring countries have been discussing close cooperation in a wide range of areas, including cross-border electricity trading, digitalisation, infrastructure projects and green energy. There are also plans to improve transport links across the strait that separates the two countries, one of the busiest borders in the world.
“How does a small, non-aligned trading nation like Malaysia navigate trade wars and geopolitical tensions?” Rafizi said. “For countries like our country and Singapore, there is only one option: to work better with each other and take advantage of synergies.”
